POWER CORPORATION,
Petitioner, Present:
VELASCO, JR., J., Chairperson,
- versus - PERALTA,
ABAD,
PERLAS-BERNABE, JJ.
COMMISSIONER OF
INTERNAL
REVENUE, Promulgated:
Respondent.
October 19, 2011
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ABAD,
J.:
The
case is about the sufficiency of sales invoices and receipts, which do not have
the words zero-rated imprinted on them, to evidence zero-rated transactions, a
requirement in taxpayers claim for tax credit or refund.
The
Facts and the Case
Petitioner
Southern Philippines Power Corporation (SPP), a power company that generates
and sells electricity to the National Power Corporation (NPC), applied with the
Bureau of Internal Revenue (BIR) for zero-rating of its transactions under
Section 108(B)(3) of the National Internal Revenue Code (NIRC). The BIR approved the application for taxable
years 1999 and 2000.
On June 20, 2000 SPP filed a
claim with respondent Commissioner of Internal Revenue (CIR) for a P5,083,371.57
tax credit or refund for 1999. On July
13, 2001 SPP filed a second claim of P6,221,078.44 in tax credit or refund
for 2000. The amounts represented
unutilized input VAT attributable to SPPs zero-rated sale of electricity to
NPC.
On
September 29, 2001, before the lapse of the two-year prescriptive period for
such actions, SPP filed with the Court of Tax Appeals (CTA) Second Division a petition
for review covering its claims for refund or tax credit. The petition claimed only the aggregate amount
of P8,636,126.75 which covered the last two quarters of 1999 and the four
quarters in 2000.
In
his Comment on the petition, the CIR maintained that SPP is not entitled to tax
credit or refund since (a) the BIR was still examining SPPs claims for the
same; (b) SPP failed to substantiate its payment of input VAT; (c) its right to
claim refund already prescribed, and (d) SPP has not shown compliance with
Section 204(c) in relation to Section 229 of the NIRC as amended and Revenue
Regulation (RR) 5-87 as amended by RR 3-88.
In
a Decision dated April 26, 2006, the Second Division[1]
denied SPPs claims, holding that its zero-rated official receipts did not
correspond to the quarterly VAT returns, bearing a difference of P800,107,956.61.
Those receipts only support the amount
of P118,945,643.88. Further,
these receipts do not bear the words zero-rated in violation of RR 7-95. The Second Division denied SPPs motion for
reconsideration on August 15, 2006.
On
appeal, the CTA En Banc affirmed the
Second Divisions decision dated July 31, 2007.[2] The CTA En
Banc rejected SPPs contention that its sales invoices reflected the words
zero-rated, pointing out that it is on the official receipts that the law
requires the printing of such words. Moreover,
SPP did not report in the corresponding quarterly VAT return the sales subject
of its zero-rated receipts. The CTA En Banc denied SPPs motion for
reconsideration on September 19, 2007.
The
Issues Presented
The
case presents the following issues:
1. Whether or not the CTA En
Banc correctly rejected the invoices that SPP presented and, thus, ruled
that it failed to prove the zero-rated or effectively zero-rated sales that it
made;
2. Whether or not the CTA En
Banc correctly ruled that the words BIR-VAT Zero Rate Application Number
419.2000 imprinted on SPPs invoices did not comply with RR 7-95;
3. Whether or not the CTA En
Banc correctly held that SPP should have declared its zero-rated sales in
its VAT returns for the subject period of the claim; and
4. Whether or not the CTA En
Banc correctly ruled that SPP was not entitled to a tax refund or credit.
The
Courts Rulings
One
and Two. The Court reiterated in San Roque Power Corporation v. Commissioner of Internal Revenue[3]
the following criteria governing claims for refund or tax credit under Section
112(A) of the NIRC:
(1) The taxpayer is VAT-registered;
(2) The taxpayer is engaged in zero-rated or
effectively zero-rated sales;
(3) The input taxes are due or paid;
(4) The input taxes are not transitional
input taxes;
(5) The input taxes have not been applied
against output taxes during and in the succeeding quarters;
(6) The input taxes claimed are attributable
to zero-rated or effectively zero-rated sales;
(7) For zero-rated sales under Section
106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the acceptable foreign
currency exchange proceeds have been duly accounted for in accordance with BSP
rules and regulations;
(8) Where there are both zero-rated or
effectively zero-rated sales and taxable or exempt sales, and the input taxes
cannot be directly and entirely attributable to any of these sales, the input
taxes shall be proportionately allocated on the basis of sales volume; and
(9) The claim is filed within two years
after the close of the taxable quarter when such sales were made.
While
acknowledging that SPPs sale of electricity to NPC is a zero-rated transaction,[4] the
CTA En Banc ruled that SPP failed to
establish that it made zero-rated sales.
True, SPP submitted official receipts and sales invoices stamped with
the words BIR VAT Zero-Rate Application Number 419.2000 but the CTA En Banc held that these were not sufficient
to prove the fact of sale.
But NIRC Section 110 (A.1)
provides that the input tax subject of tax refund is to be evidenced by a VAT
invoice or official receipt issued
in accordance with Section 113. Section
113 has been amended by Republic Act (R.A.) 9337 but it is the unamended
version that covers the period when the transactions in this case took
place. It reads:
Section 113.
Invoicing and Accounting Requirements for VAT-Registered Persons.
A. Invoicing Requirements. A
VAT-registered person shall, for every sale, issue an invoice or receipt. In
addition to the information required under Section 237, the following
information shall be indicated in the invoice or receipt:
(1) A statement that the seller is a VAT-registered
person, followed by his taxpayers identification number (TIN); and
(2) The total amount which the purchaser
pays or is obligated to pay to the seller with the indication that such amount
includes the value-added tax. (Emphasis supplied)
The above does not distinguish between
an invoice and a receipt when used as evidence of a zero-rated transaction. Consequently, the CTA should have accepted
either or both of these documents as evidence of SPPs zero-rated transactions.
Section 237 of the NIRC also makes
no distinction between receipts and invoices as evidence of a commercial
transaction:
SEC. 237. Issuance
of Receipts or Sales or Commercial Invoices. All persons subject to an internal revenue
tax shall, for each sale or transfer of merchandise or for services rendered
valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices,
prepared at least in duplicate, showing the date of transaction, quantity, unit
cost and description of merchandise or nature of service: Provided,
however, That in the case of sales, receipts or transfers in the amount of One
hundred pesos (P100.00) or more, or regardless of the amount, where the
sale or transfer is made by a person liable to value-added tax to another
person also liable to value-added tax; or where the receipt is issued to cover
payment made as rentals, commissions, compensations or fees, receipts or
invoices shall be issued which shall show the name, business style, if any, and
address of the purchaser, customer or client: Provided, further, That where the
purchaser is a VAT-registered person, in addition to the information herein
required, the invoice or receipt shall further show the Taxpayer Identification
Number (TIN) of the purchaser.
The original of
each receipt or invoice shall be issued to the purchaser, customer or client at
the time the transaction is effected, who, if engaged in business or in the
exercise of profession, shall keep and preserve the same in his place of
business for a period of three (3) years from the close of the taxable year in
which such invoice or receipt was issued, while the duplicate shall be kept and
preserved by the issuer, also in his place of business, for a like period.
The Commissioner
may, in meritorious cases, exempt any person subject to internal revenue tax
from compliance with the provisions of this Section. (Emphasis supplied)
The
Court held in Seaoil Petroleum
Corporation v. Autocorp Group[5]
that business forms like sales invoices are recognized in the commercial world
as valid between the parties and serve as memorials of their business
transactions. And such documents have probative
value.
Three.
The CTA also did not accept SPPs official receipts due to the absence
of the words zero-rated on it. The omission,
said that court, made the receipts non-compliant with RR 7-95, specifically
Section 4.108.1. But Section 4.108.1 requires
the printing of the words zero-rated only on invoices, not on official
receipts:
Section 4.108-1. Invoicing Requirements. All VAT-registered
persons shall, for every sale or lease of goods or properties or services,
issue duly registered receipts or sales or commercial invoices which must show:
1. The name, TIN and address of seller;
2. Date of transaction;
3. Quantity, unit cost and description of
merchandise or nature of service;
4. The name, TIN, business style, if any,
and address of the VAT-registered purchaser, customer or client;
5. The
word "zero-rated" imprinted on the invoice covering zero-rated sales;
and
6. The invoice value or consideration.
x x x x (Emphasis
supplied)
Actually,
it is R.A. 9337 that in 2005 required the printing of the words zero-rated on
receipts. But, since the receipts and
invoices in this case cover sales made from 1999 to 2000, what applies is Section
4.108.1 above which refers only to invoices.
A
claim for tax credit or refund, arising out of zero-rated transactions, is
essentially based on excess payment. In zero-rating a transaction, the purpose
is not to benefit the person legally liable to pay the tax, like SPP, but to
relieve exempt entities like NPC which supplies electricity to factories,
offices, and homes, from having to shoulder the tax burden that ultimately
would be passed to the public.
The principle of solutio indebiti should govern this case
since the BIR received something that it was not entitled to. Thus, it has to return the same. The government should not use technicalities to
hold on to money that does not belong to it.[6] Only a preponderance of evidence is needed to
grant a claim for tax refund based on excess payment.[7]
Notably, SPP does no other
business except sell the power it produces to NPC, a fact that the CIR did not contest
in the parties joint stipulation of facts.[8] Consequently, the likelihood that SPP would
claim input taxes paid on purchases attributed to sales that are not zero-rated
is close to nil.
Four. The Court finds that SPP failed to indicate
its zero-rated sales in its VAT returns. But this is not sufficient reason to deny it
its claim for tax credit or refund when there are other documents from which
the CTA can determine the veracity of SPPs claim.
Of
course, such failure if partaking of a criminal act under Section 255 of the
NIRC could warrant the criminal prosecution of the responsible person or
persons. But the omission does not
furnish ground for the outright denial of the claim for tax credit or refund if
such claim is in fact justified.
Five.
The CTA denied SPPs claim outright for failure to
establish the existence of zero-rated sales, disregarding SPPs sales invoices
and receipts which evidence them. That
court did not delve into the question of SPPs compliance with the other
requisites provided under Section 112 of the NIRC.
Consequently, even as the Court
holds that SPPs sales invoices and receipts would be sufficient to prove its zero-rated
transactions, the case has to be remanded to the CTA for determination of whether
or not SPP has complied with the other requisites mentioned. Such matter involves questions of fact and
entails the need to examine the records. The Court is not a trier of facts and the
competence needed for examining the relevant accounting books or records is
undoubtedly with the CTA.
WHEREFORE, the Court GRANTS the petition, SETS
ASIDE the Court of Tax Appeals En
Banc decision dated July 31, 2007 and resolution dated September 19, 2007,
and REMANDS the case to the Court of
Tax Appeals Second Division for further hearing as stated above.
SO
ORDERED.
ROBERTO A. ABAD
Associate Justice
WE
CONCUR:
PRESBITERO
J. VELASCO, JR.
Associate Justice
Chairperson
DIOSDADO M. PERALTA JOSE CATRAL MENDOZA
Associate Justice Associate Justice
ESTELA M.
PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
PRESBITERO J. VELASCO, JR.
Associate Justice
Chairperson, Third Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution and the Division Chairpersons Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
RENATO
C. CORONA
Chief Justice
[1] Penned by Associate Justice Juanito C.
Castaeda, Jr. with the concurrence of Associate Justices Erlinda P. Uy and
Olga Palanca-Enriquez, rollo, pp.
115-127.
[2] Penned by Associate Justice Lovell R. Bautista
with the concurrence of Associate Justices Juanito C. Castaeda, Jr., Erlinda
P. Uy, Caesar A. Casanova and Olga Palanca-Enriquez. Presiding Justice Ernesto D. Accosta
dissented, id. at 77-101.
[3] G.R. No. 180345, November 25, 2009, 605 SCRA
536, 555.
[4] As provided in Section 108(B)(3)
of the NIRC, as amended, and in Republic Act 6395, also known as An
Act Revising the Charter of the National Power Corporation.
[5] G.R. No. 164326, October 17, 2008, 569 SCRA
387, 395-396.
[6] State Land Investment Corporation v. Commissioner of Internal Revenue,
G.R. No. 171956, January 18, 2008, 542 SCRA 114, 123.
[7] Commissioner of Internal Revenue v. Mirant Pagbilao Corporation,
G.R. No. 172129, September 12, 2008, 565 SCRA 154, 166.
[8] Rollo,
p. 113.